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CA Final · Direct Tax Laws & International Taxation · Incomes which do not form part of Total Income

Greenleaf Plantations Ltd, an Indian company, grows and manufactures tea in Assam and sells it. Its income from the sale of this tea, computed as if it were business income, is ₹50,00,000 for the tax year. Applying the percentage in Rule 271 of the Income-tax Rules, 2026 (before any allowance for replanting), what amount is deemed to be income liable to tax?

The amount liable to tax is ₹20,00,000. Rule 271 deems 40% of the income from the sale of tea grown and manufactured by the seller in India to be taxable income. Forty percent of ₹50,00,000 equals ₹20,00,000, and the balance is not taxed.

  1. A₹12,50,000
  2. B₹17,50,000
  3. C₹20,00,000Correct
  4. D₹30,00,000

Explanation

Rule 271(1), Table Sl. No. 4, treats 40% of the income from the sale of tea grown and manufactured by the seller in India as income liable to tax. 40% of ₹50,00,000 is ₹20,00,000. The 35% rate applies to rubber, giving ₹17,50,000, which is wrong for tea. The remaining 60% is the part not liable to tax.

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